According to a press release dated October 08, 2008, Xethanol Corporation (AMEX: XNL), a renewable energy company, announces that on October 6, 2008, the United States District Court for the Southern District of New York approved the settlement agreement negotiated between Xethanol and a class of plaintiff shareholders who had sued the company on October 24, 2006. The Final Approval Order also dismisses the action, which is now concluded. The settlement agreement was reached on November 28, 2007 during a mediation overseen by a retired United States District Court Judge in West Palm Beach, Florida, and attended by counsel for plaintiffs, counsel for the company and the individual defendants and counsel for the company’s insurance carriers.
On February 7, 2007, the Court entered the Order consolidating several actions under In Re Xethanol Corporation Securities Litigation, 06cv10234. On March 15, 2007, the Court entered the Order appointing the Counsell Group as Lead Plaintiffs and appointing Kahn Gauthier Swick is appointed class counsel. On March 27, 2007, the plaintiffs filed an Amended and Consolidated Class Action Complaint, and the defendants responded by filing a motion to dismiss the Amended and Consolidated Class Action Complaint. On September 7, 2007, Judge Harold Baer denied defendants’ motion to dismiss. On April 29, 2008, a Motion for Settlement Preliminary Approval, filed by The Counsell Group. According the notice of settlement, dated May 29, 2008, a $2,800,000 cash Settlement was proposed. On May 16, 2008, the judge granted the motion for Preliminary Approval of Settlement. The Court certified the Class solely for purposes of this Settlement. A hearing was set on the matter.
The original complaint charges Xethanol and certain of its officers and directors with violations of Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. Throughout the Class Period, Xethanol repeatedly assured investors that it could sustain itself on revenue from corn ethanol production while successfully commercializing biomass ethanol production. In fact, however, as investors have now learned, Xethanol was suffering from a host of undisclosed adverse factors that negatively impacted its business and it appears that they do not have the ability to commercialize biomass ethanol in the foreseeable near term. As investors learned the truth about Xethanol, shares of the Company declined precipitously -- falling from a Class Period high of over $15 per share in April 2006, to less than $4.00 per share by the end of the Class Period. While shares of Xethanol were artificially inflated during the Class Period, certain insiders were able to liquidate millions of dollars of their personally held Xethanol shares.
Particularly, the complaint alleges that Xethanol: (1) misrepresented management's experience and standard of ethics; (2) omitted disclosing a series of related party transactions and association with investors who had alarming records of stock fraud and related shareholder abuses; (3) materially overstated the Company's profitability by under-reporting the true costs associated with completing a biomass to ethanol production facility, and by failing to make proper adjustments to the Company's financial reports; (4) lacked any reasonable basis to assert that the Company was operating according to plan or could achieve the near-term commercialization of biomass ethanol production, or achieve the guidance sponsored and/or endorsed by the Company; and (5) caused plaintiffs and other Class members to purchase Xethanol common stock at artificially inflated prices.